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GLOBAL MARKETS-Dlr firm, oil eases as action on Syria looks delayed
August 30, 2013 / 9:05 AM / 4 years ago

GLOBAL MARKETS-Dlr firm, oil eases as action on Syria looks delayed

* Dollar near 4-week high on upbeat U.S. data
    * Oil falls as no imminent attack seen against Syria
    * World shares set to end week and month lower
    * Emerging currencies steady, set for big monthly losses

    By Richard Hubbard
    LONDON, Aug 30 (Reuters) - Upbeat economic data from the
United States kept the dollar near a four-week high against
major currencies on Friday though oil  prices fell as
expectations of an imminent U.S.-led strike against Syria ebbed.
    U.S. stock index futures pointed to a firmer start when Wall
Street opens though as more economic numbers due out on private
spending and manufacturing activity were likely to add to the
growing picture of an economy steadily improving.
    However, a holiday weekend in America and month-end
positioning by traders was keeping activity light and markets
remain worried about the Middle East and the impact of an early
withdrawal of stimulus by the Federal Reserve.
    "I think the dollar recovery trend remains in place, though
we may see a pause over the next few days," said Ian Stannard,
head of European foreign exchange strategy at Morgan Stanley.
    "The underlying fundamental picture is still there and that
comes down to a rise in global yields and a rise in the U.S.
dollar that is still going to weigh on the more vulnerable
    Most major equity markets and many emerging currencies
looked set to end the week and the month sharply lower as
investors pull out of riskier assets in expectation of the Fed
action and some form of Western intervention against Syria.
    The growing caution was reflected in a Reuters asset
allocation poll of 54 fund managers across the United States,
Europe and Japan. It showed investors had increased cash
holdings to their highest level in a year, while also lifting
exposure to equities and cutting bond positions. 
    Fears of broader conflict in the Middle East have eased
slightly after Britain said it would not join any military
action, although France said it still backs action to punish
Syrian President Bashar al-Assad's government for an apparent
poison gas attack on civilians. 
    Any military strike now looks likely to be delayed at least
until U.N. investigators report back after leaving Syria on
Saturday, with Russia still fiercely opposing any move and 
China cautioning against any U.N. Security Council action until
the investigation is complete. 
    The easing of tensions over Syria sent Brent crude oil to
near $115 a barrel, off highs of $117 set earlier this week when
military action seemed imminent. U.S. crude was down 55 cents to
    "The situation is still volatile," said Alex Yap, an analyst
at energy consultancy FGE in Singapore. "If the U.S. decides to
attack, prices could be pushed higher."
    MSCI's world equity index, which tracks
shares in 45 countries, was virtually flat on Friday but was
heading for its worst week of the month and its worst month
since June. 
    European shares were feeling the pressure from a drop in oil
stocks with the broader STOXX Europe 600 index down 0.5
percent, taking its weekly losses to around 2.1 percent. 
    Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan finished up about 0.7 percent,
managing a 0.1 percent weekly gain but a 1.3 percent monthly
loss. Japan's Nikkei lost 0.5 percent despite new data
that painted a brighter economic picture. 
    Currency markets focused on the economic outlook and
interest rate differentials after U.S. data on Thursday showed a
better-than-expected annual growth of 2.5 percent in the second
    Combined with strength in the U.S. labour market, the data
has bolstered the case for the Fed to begin winding down
stimulus as early as September. 
    This has pushed up the interest rate-sensitive two-year U.S.
Treasury yield to its highest since early July at
0.3947 percent and the 10-year yield back up to 2.76
percent and lent support to the dollar.
    The dollar index, which measures its value against
six major currencies, was at 81.994, not far from a four-week
high of 82.067 struck on Thursday.
    Among emerging currencies, the Indian rupee was
trading at 67.36 per dollar, down from Thursday's close of
66.55. It has tumbled 10.4 percent against the dollar so far
this month, and looks to be heading for its largest monthly fall
ever, according to Thomson Reuters data.
    In commodity markets, gold fell one percent to below
$1,400 an ounce, moving away from a 3-1/2 month high hit on
Wednesday when the fears over Syria prompted a flight to safety.

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